Thursday, December 24, 2009

Jackson Hewitt gets dumped by its loan partner (JTX, PCBC)

In a filing this morning, tax-return experts Jackson Hewitt (JTX) announced that their partner in providing refund anticipation loans - RAL's - has backed out of their agreement.

Santa Barbara Bank & Trust was expected to make 75% of all company RAL's this year, but was told by its bank regulator to dump this business.  What that means about RAL's going forward is anyone's guess, but based on company filings it will be a material hit to JTX's results.  Financial product revenue, of which RAL's are a part, made up 24% of last year's revenue:

JTX shares are off 24% today.  It being Christmas Eve, many analysts and investors are not even at their desks to sift through the earnings impact this will have, so in the absence of some feedback investors are dumping shares.

The whole release:

"Jackson Hewitt Tax Service Inc. (the “Company” or “we”) previously disclosed that our subsidiaries entered into amendments to our agreements with Santa Barbara Bank & Trust (“SBBT”), a division of Pacific Capital Bank, N.A., for the primary purposes of establishing the fees to be paid by SBBT to the Company for the 2010 tax season and the number of Jackson Hewitt Tax Service locations during the 2010 tax season in which SBBT will offer, process and administer certain financial products, including refund anticipation loans (“RALs”) to Jackson Hewitt Tax Service customers.
The Company also previously disclosed that it anticipates that SBBT and Republic Bank & Trust Company would provide roughly the same proportion of the overall program for financial products in the 2010 tax season as each provided in the 2009 tax season and that the Company further anticipated that the amended agreements with the banks, including the Company’s amendments to the MetaBank d/b/a Meta Payment Systems agreements, when coupled with related customer and franchisee program changes, would not materially impact its planned 2010 fiscal year income.
On December 20, 2009, SBBT informed the Company that SBBT will not be in a position to originate RALs for the 2010 tax season. SBBT stated that their determination is based upon a directive received by them from their regulator. We had expected SBBT to provide approximately 75% of our overall program for financial products for the 2010 tax season, including both RALs and Assisted Refunds. SBBT has further stated to us that it has signed a non-binding letter of intent to sell its RAL and Assisted Refund business.
We are cooperating with SBBT in their efforts to prevent any interruption in our financial product program for the 2010 tax season. In addition, we are separately seeking alternative arrangements for additional financial products."

1 comment:

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